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 British banks have failed to rein in pay despite a new EU cap,
leading to a threat that politicians and regulators in both
Brussels and London might impose more curbs.
Few have drawn as much criticism as Barclays, where profits fell by
a third but staff have just won a 10 percent bigger bonus pot to
share for last year than the year before.
Jenkins said in a newspaper interview last week that he was forced
to increase bonuses after an exodus from Barclays' investment bank
in America left him fearing a "death spiral". But the excuse seems
only to have annoyed shareholders who think he should have fought
harder on their behalf.
"The bonus issue is on a collision course with shareholders again. I
have been unhappy with this for a long time," one of the bank's
institutional shareholders told Reuters on Tuesday.
"Shareholders have been long suffering, while employees sail on
unscathed. They will trot out the same arguments again, about how if
they don't pay up they will lose key staff. This is a bluff that has
never yet been called," the shareholder added.
In a rare public display of criticism, Fidelity, Barclays' 17th
biggest shareholder, said it was "disappointed" the bank was not
paying shareholders more.
Chief investment officer Dominic Rossi said the bank had landed
itself in a "public relations mess". Fidelity confirmed the
comments, first reported by Sky News.
Barclays is now paying three times more in bonuses to staff than in
dividends to its owners, a fact that business leaders' group the
Institute of Directors said should push shareholders to be more
"aggressive".
Once hailed as Saint Antony for his pledge to overhaul the
hard-charging culture at Barclay's investment bank, Jenkins is
instead on the defensive after raising the 2013 bonus pool to 2.4
billion pounds ($4 billion) despite the fall in profits.
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While investors do not have a vote on overall pay levels at banks,
some told Reuters last week they could voice dissatisfaction at
banks' failure to cut overall pay by voting down remuneration for
executives. Shareholders in British companies have a binding vote on
directors' pay.
Barclays holds its annual general meeting on April 24.
Barclays declined to comment on the criticism. Its shares dropped
2.4 percent to 236.1 pence on Tuesday after sagging as low as
233.6p, their lowest level since December 2012. The stock has fallen
15 percent since results on February 11 amid concern that fixed
income revenues have stayed weak across the industry, and Barclays
is losing share to U.S. rivals.
Bumper bonuses have been widely blamed for encouraging the
risk-taking that contributed to the 2007-09 financial crisis, which
saw taxpayers bail out lenders with billions of pounds and euros of
public money.
But efforts to rein them in have failed, with almost half of
Britain's bankers and other financial service professionals set to
get a higher bonus for 2013 than they did in 2012 and the average
payout rising by nearly a third, a survey showed.
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STIFFER REGULATIONS?
Barclays has often been a lightning rod for pay issues in Britain as
it has the largest investment bank and the highest pay scales among UK lenders.
But this year other lenders have also irked regulators and politicians.
Banks in Britain have led the way in raising fixed pay in response
to new European rules that cap banker bonuses. The banks say they
have no choice but to raise other forms of pay or lose top talent to
U.S. rivals that have no bonus caps.
Britain's HSBC <HSBA.L> has said it will use "allowances", paid
monthly or quarterly to raise fixed pay. UK peers Lloyds <LLOY.L>
and Barclays last week indicated they would follow suit.
Their actions prompted European lawmakers on Monday to agree to
consider a revamp of the bonus rules to prevent British bankers from
softening their impact.
The Bank of England is also looking at the allowances to see if they
are a covert way of avoiding the EU bonus cap.
While Britain's Conservative-led government is challenging the bonus
cap in the EU's top court, fearing its impact on London's banking
hub, British lawmakers from across the political spectrum are
unhappy that bonuses are rising.
Andrew Tyrie, a Conservative backbencher who leads an influential
parliamentary committee on banking, has warned that authorities may
need to step in to cap pay. The opposition Labor Party has said if
it returns to government next year it could reintroduce windfall
taxes on bankers' bonuses, potentially raising 2 billion pounds.
Labor introduced a "one-off" bonus levy in 2009.
Shareholder advisory group Pirc said stiffer rules might be the only
thing that works.
"If the big banks have not got the message of restraint by now maybe
it's time for stronger regulations," a spokesman for Pirc said on
Tuesday.
The main concern among Barclays shareholders is that Jenkins does
not have control of costs in the investment bank, one person
familiar with the matter said.
Jenkins has told investors the bank increased the bonus pool because
of a big rise in departures in its U.S. investment bank after it cut
bonuses in 2012 more than rivals.
The departure rate in the U.S. investment bank doubled last year to
near 10 percent, people familiar with the matter said.
Barclays' annual report last week showed the bank paid 481 employees
at least 1 million pounds last year, up from 428 the year before. It
said 57 percent of them were based in the United States and 27
percent were in Britain.
($1 = 0.6013 British pounds)
(Editing by Carmel Crimmins and Peter
Graff)
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